What caught my eye this week.
The ‘proper’ savings rate for a pursuer of financial freedom is one of those perennial hand grenades lobbed into the otherwise cozy and supportive world of personal finance blogging.
Partly that’s because of fundamental differences in philosophy when it comes to how many fingers to raise – and how vigorously – when faced with the endless temptations of consumer culture.
But mostly it’s because we all have different values and financial situations. We’re at different stages in our journeys, too.
Hence we see the spectacle of comfortably retired Boomers berating 20-somethings for ordering a bit of avocado on toast, while other 20-somethings shame their own for getting a latte from Starbucks (shameful, true, but not for financial reasons) – and everything in-between.
When I bought my flat, I also bought a fancy coffee machine. I’d wanted one for at least a decade and for me it was part of the home ownership dream.
But to some readers it was akin to Bob Dylan going electric at the Newport Folk Festival.
Never mind that I could easily afford it – and I’d waited until I could, too – or that my savings rate had been 20-50% for 20 years. That I’ve never bought a car, let alone several cars, in my life. Or that a good coffee is one of my top ten hedonistic pleasures.
They didn’t like it – and yet other readers slapped me on the back.
Enjoy yourself, they smiled. Ignore the haters!
Comparison shopping
Funnily enough I didn’t feel massively more kinship with the latter than the former.
That’s because we all had – and have – a lot more in common with each other than could be divided by a homemade espresso.
While others read the footie results or catch up on Love Island, here we find ourselves on a pretty niche money and investing blog. We’re all looking to put or keep our finances on a decent footing. And making our own decisions daily about what to splurge on and what to eschew.
The only contention is that one person’s luxury treat is another person’s wasteful squandering. That his cost-saving gambit is her unthinkable sacrifice.
A luxury you just can’t forfeit might not even register for me.
You drive a BMW Coupe 343 B-Liner Sedan Thingywotsit? Really?!
At least I think that’s what you said. Knock yourself out.
I don’t do cars. Maybe you don’t do espresso machines. It’s silly arguing over the specifics.
The big picture – money in, money out, investing the rest – is what matters.
Better latte than never
It’s a similar story with savings rates.
If you’ve no money socked away at 50 and you tell me you’re going to start saving 5% of your salary into a SIPP, then I’m going to tell you it’s not enough.
Until, that is, you tell me you’re earning £500,000 a year…
At the same time a 22-year old saving 5% of their fairly ordinary professional salary – topped up by the company and the government – might well be on their way to becoming a millionaire by the usual retirement age without ever feeling they sacrificed anything.
Which in turn leads to those circular arguments about whether compound interest matters or not.
If you only start saving properly when you’re a decade away from retiring, I agree it’s not going to do much for you.
If you began in your early 20s and now you’re in your 50s – seeing a good year in the stock market bolt more than your annual salary onto your portfolio – well, it’s hard to know where to begin.
It all adds up
Nick Maggiulli over at Of Dollars and Data therefore did everyone a great favour this week by pinning some numbers onto this age-old drama.
By showing how the impact of saving a bit extra varies depending on how much you’re already saving – and for how long you intend to keep at it – Nick has revealed the mathematics behind the emotions in these debates.
For example, let’s say you are currently on-track to retire in 30 years. Nick’s table below shows how many years of work you could avoid if you increase your savings rate by three different amounts:
So if you’re already saving 20% of your salary, for instance, then save 5% more for the rest of your working years and you could actually retire three years and a bit earlier.
What’s striking about this table is actually how little difference saving even more money makes once you’re already putting away a healthy 20% or more of your income. That’s the long time horizon at work.
Have all the avocados and lattes you like, my young and disciplined friends!
In contrast, if you’re only currently saving 5% to be on-target to retire in 30 years, then tripling your saving rate could nearly halve your remaining years in the office.
There’s plenty more insights unearthed by Nick’s tables and graphs, so go read it.
And have a great weekend!
p.s. Thank you to everyone who has already signed up to become a Monevator member. It’s truly gratifying and the strong start has encouraged us to think we can eventually become a sustainable operation. What’s more, many of you shared some generous words, too. If you haven’t already read the more than 130 comments from readers on last Saturday’s post, please do! And thanks again.
From Monevator
What do rising rates mean for our portfolios? – Monevator [For members]
Mortgages and emotions: 2022’s interest rate mayhem – Monevator
From the archive-ator: The obvious thing we all forget when we borrow money – Monevator
News
Note: Some links are Google search results – in PC/desktop view click through to read the article. Try privacy/incognito mode to avoid cookies. Consider subscribing to sites you visit a lot.
Bank of England raises key interest rate by 0.25% to 4.5%… – Sky News
…and warns UK inflation will stay higher for longer it thought – BBC
Meanwhile UK economy expanded by just 0.1% in Q1 2023 – BBC
What do higher interest rates mean for your finances? – Which
Government drops plans to scrap leasehold property system – Guardian
Grocery chiefs warn new Brexit red tape could empty shelves – Independent
London: a “very problematic” stock market – CNBC
Global prime property index falls for the first time since 2009 [PDF] – Knight Frank
Products and services
Cheap and free things to do over the holidays – Which
Skipton launches first 100% mortgage since 2008 – MoneySavingExpert
Blackrock and Vanguard ETFs will dominate for years – ETF.com
Open a SIPP with Interactive Investor and pay no SIPP fee for six months. Terms apply – Interactive Investor
Consumers on ditching gas central heating for heat pumps – Guardian
Backlash grows over new efficiency rules for landlords – This Is Money
Open an account with low-cost platform InvestEngine via our link and get £25 when you invest at least £100 (T&Cs apply. Capital at risk) – InvestEngine
What are your supermarket loyalty points worth? – Be Clever With Your Cash
‘Reverse ATMs’ at some US stores swap cash for pre-pay cards… – Axios
…while also in the US, a new fintech is targeting the over-60s – TechCrunch
Homes for sale in the super-suburbs, in pictures – Guardian
Comment and opinion
Should you save more to retire earlier? – Of Dollars and Data
Three lessons from the 60/40’s stumble – Morningstar
Defined benefit pensions: not dead yet [Search result] – FT
Asking the wrong questions – Oblivious Investor
The future will be… something – Fortunes & Frictions
Tim Harford: not everyone can substitute away inflation [Search result] – FT
Free to be – Humble Dollar
Revisiting the Permanent Portfolio – DIY Investor UK
The use case for FOMO investing – Think Advisor
Debating nationalizing the UK water companies [Podcast] – ALTIF
“We won’t be able to pay this much”: higher rates hit home – Guardian
Be an emotional person, just not with your money – Darius Foroux
The harvest that matters – Simple Living in Somerset
Pay’s the issue, but don’t forget public sector pensions – David Smith
US recession obsession mini-special
What’s the best asset type to hold during a recession? – Morningstar
Gold versus inflation, stagflation, and recession – Institutional Investor
Swap and credit spreads still say no US recession – Califia Beach Pundit
US interest rate hiking cycles compared [Infographic] – Visual Capitalist
Naughty corner: Active antics
Be glad short sellers exist and [sort of] conspire – Capital Gains
Should investors trust their gut? – Behavioral Investment
Mayday for Interactive Broker margin lending – Fire V London
Boost your returns with a very, very long vacation – Morningstar
Diversification or di-worse-ification? – Verdad
The physical world can affect an investor’s returns – Institutional Investor
Kindle book bargains
The Moneyless Man: A Year of Freeconomic Living by Mark Boyle – £0.99 on Kindle
200 Years of Muddling Through: The British Economy by Duncan Weldon – £0.99 on Kindle
A Journey Through Labour’s Lost England by Sebastian Payne – £0.99 on Kindle
Too Big To Jail: The Greatest Banking Scandal of the Century by Chris Blackhurst – £0.99 on Kindle
Environmental factors
The people living ultra-low-carbon lifestyles – BBC Future Planet
A patch of seaweed is growing to record size in the Atlantic – Vox
Seaflooding – Uncharted Territories
How wild pigs retook Singapore – Hakai
Why climate change is not an environmental issue – The Walrus
Robot overlord roundup
Schooled – Indeedably
How AI knows things nobody told it – Scientific American
Google reveals AI updates as it vies with Microsoft – BBC
Artificial Intelligence is not going to kill us all – Slate
ChatGPT fever is attracting billions in VC funding – Wall Street Journal [h/t AR]
Will a robot take YOUR job? [Data, US] – Will Robots Take My Job
Off our beat
The star athlete family office – Profluence Sports
Zelda: Tears of the Kingdom is the best Switch game ever made – Inverse
Should we abandon the ‘war’ on cancer? – Aeon
Read The Economist backwards [Podcast, or scroll for text] – Russell Clark
Who better to sing old Brexit tunes than this over-hyped new act? – Marina Hyde
Monkeys and the ‘reverse salient’ – Annie Duke
A 102-year old doctor on letting go to be happier – CNBC
How Russia’s invasion transformed one Ukranian city [With graphics] – Vox
R.I.P. Metaverse – Business Insider
And finally…
“People will choose unhappiness over uncertainty.”
– Tim Ferris, The 4-Hour Work Week
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I don’t think I commented on last week’s membership post but signed up during the week. Just wanted to add to the round of thanks and I’m more than happy to support the site financially. Discovering this site has literally been life changing, so it’s the least I can do. Thanks again for all the work you, TA and others do and look forward to continuing to read, learn and take insights from this and the community in the years ahead – cheers!
Article link highlighting 100 per cent mortgages being offered again with the guardians “we won’t be able to pay this much” article, says much about how reliant we are in the UK on feeding the bottom of the housing pyramid.
Until the Boomer asset wealth trickle down starts to benefit younger generations in earnest, think if you’re still in the workforce trying to build your nest, we’re all in for a bumpy messy decade or two.
Having abandoned the car for public transport for mixture of economic (one bill after another) and environmental reasons @TI’s choices here resonate. Re: the Of Dollars and Data link, partial retirement may be an option for some as an alternative to working longer, going FIRE with less, or increasing savings rate. Not an option for everyone of course, but perhaps a compromise of sorts worth considering for those with access to it.
I always find the taboo in all this (savings ratios) is the cost of raising a family or other family matters in regard to any personal savings goal. Life choices. Eg. What is the cost of having a first child or an extra child? What happens when someone in the household is long term sick and can no longer work? How c/sh/would it alter how long you would need to work compared to before? Ouch. Perhaps it’s far too complex to articulate or maybe it’s just a fear of being labelled a misanthrope or kicking off something far too hot and emotional.
But it is a thing and not much computed in your 20’s or 30’s even.
Rarely really discussed and could do well to add to those financial literacy classes – you know the ones the kids never really get at most schools.
Real life alters the cold maths of saving ratios. Not just the coffee machine status anxieties.
Re. savings rates: I was recently reading Occam Investing’s similar take on this, where he compares the impact of savings rate versus investment returns. In many ways, his post is a helpful illustration of Morgan Housel’s point about focusing on what you can control.
https://occaminvesting.co.uk/should-i-save-or-invest/
Re: Harford’s piece on inflation. We’ve done a lot of substituting and doing without (aka being able to be flexible with spending). But some things cannot be substituted or shopped around.
Our buildings insurance has gone up 400% in 5 years and went up 100% last year. It’s commercial insurance because we have share of freehold, a frequent form of commonhold in our region. We have no choice but to take what we can get and yes, we already have a broker. This year it will be nearly £800 for a tiny 350 sq ft flat. Most of it is from increased regulation costs and fallout from Grenfell. And the personal liability from our commonhold is increasing massively.
@159F > I always find the taboo in all this (savings ratios) is the cost of raising a family or other family matters in regard to any personal savings goal.
Would this not be amenable to the same logic, perhaps applied at a household level? Having children is a lifestyle choice in a similar way to TI’s example BMW Coupe 343 B-Liner Sedan Thingywotsit. There is some argument it also raises risk somewhat, both to the relationship and in a wider hostage to fortune aspect, and the commitment is longer.
But the savings rate principles still hold, but for a major household project perhaps it makes sense to scope it at the household level. Maybe with some accident/disability/term life insurance to protect these tail risks in the early days. Thankfully these are reasonably cheap when you are young 😉
You reach a point where you can’t really increase your standard of living much with extra spending – like if you don’t especially value cars, holidays, restaurants, etc, after that you might have positive cash flow anyway – I don’t think it’s worth sacrificing quality of life in youth to *retire early* since you’ll retire eventually anyway, but it is worth sacrifice to *buy a house* since that has a more direct impact on the quality of your family life when young and how many hours you & your spouse will have to work when supporting a family – ultimately getting on the housing ladder would affect how many hours you can spend with any children growing up. Before someone meets a spouse and before they have the costs related to that is the ideal time to whack out the overtime and save up to become homeowner.
But as for retirement, I think find a job you don’t mind doing to remove the urgency, be aware of the dramatic change in life of spending 24/7 with your spouse and losing work friends, and phase into it comfortably, which’d mean having a plan for how you’d spend the time and not rushing into it, letting it rule your thinking or putting fixed numbers on it when markets & inflation can change – save what you can without pain, take the level of risk you feel comfortable with, and do it when you can afford to but no sooner – whenever that is – no fixed dates.
Perhaps one way to increase your savings rate is not to allow your lifestyle to increase as quickly as your income does – it’s very easy subconsciously to buy more expensive wine, eat in dearer restaurants etc. Great, if that’s a quality of life choice, not necessary if you’re simply ‘keeping up with the Joneses’
It’s easy to say ‘save 10% of your salary from age 20 and you’ll be good’. The important point most personal finance blogs miss is the pressure to save the deposit for a house and how to manage pension contributions at the same time.
Most readers on this blog would be 40+ and have a house, so it’s not important for them, but the 20s are going to find the advice on here a bit ‘theoretical’ considering the social pressure to buy a house.
@JDW — Thanks so much!
@CSTWFTT — I agree to some extent. However given where we are, I think this is a pragmatic response from Skipton, in that it enables people to convert rental outgoings which they are already paying (and which determine the maximum size of the mortgage, as you know from the piece) into mortgage payments. As such it should have the effect of displacing a landlord with a first-time buyer. Given most people want to own their own home, rightly or wrongly, and that it’s broadly considered a societal good (again, rightly or wrongly) I think as implemented it’s a decent addition to the borrowing landscape.
@Time Like Infinity — It’s very easy to live in London without a car — and even more so than the old days, thanks to online shopping and delivery. For less dense or well connected places, we need to bring on the self-driving robots.
@19F @ermine — I agree having kids is a lifestyle choice. Perhaps the biggest one there is, and arguably for many an existential necessity. But a lifestyle choice all the same. From a practical point of view everyone’s choices are different, so going into the micro detail on savings rates with children versus without isn’t any more viable than doing the same for a holiday home or keeping horses in stables. There’s no doubt if I had kids of course that there’d be more discussion of the expenses etc on the site. As it is (and on the misanthrope point) I have an unfinished article in drafts provocatively called “Don’t have kids”, which comes at it from the financial angle. Even in my spikier pomp I guess I didn’t dare finish it. Not sure if I could now. We’ll see! 🙂
@tetromino — Yes, doing what you can versus raging against what you can’t or wishing it was different is a first step to wisdom haha. It’d have saved me ten years at least and perhaps £250,000 or more when it came to the housing market.
@The Hare — Yes, the Grenfell tragedy has case a long shadow, albeit thankfully more financial than with more horrible disasters. I have a friend whose flat has been effectively blighted and hard to sell for years now. Even after the steps by government and the builders to redress some of the issues they remain mired in wrangling. 🙁
@Matthew — Interesting reflections. For my part I’ve mostly abandoned telling people what they ‘should’ or ‘shouldn’t’ do at the various stages of their lives. 🙂 It’s all so personal, and I’m undoubtedly an outlier in that I had a fun job in my 20s that paid for social life, I was still very happy with my pseudo graduate student lifestyle into my 30s, and I have always found it easier to save and exciting to invest. And of course, no kids.
More: https://monevator.com/live-like-a-graduate-student-and-save/
@Martin T — Very true. A couple of times in my life I’ve been aware I’ve made a conscious choice not to ‘level up’. Especially with holidays and travel, which devours most young people’s incomes these days. When I bought my flat though my expenditure on all kinds of non-essential niceties jumped off the baseline like a graph of interest rates from 2019 to 2022 😉 At least @MrsTA tells me @TA has been raving about my flat and its pleasantness (thanks @TA!) since their visit a few weeks ago. Not that I made my choices for anyone but me, but I suppose if on some level you’re going to start keeping up with the Joneses even a tad, it helps if they rate your taste! 😉
@BBBetter — Hmm, I am wary of being one of those older people who has a property and now tells younger people to knuckle down because it was ever-thus — it wasn’t for my generation, I just stalled for decades for foolish reasons — but we’re getting to the point where at least at the early end of ’40s’ property was never cheap in London, the South East, and the more expensive (/more typically Monevator-adjacent) cities.
I would ignore the societal pressure to buy a house, personally. (I did — see my link in the comment above.) However it can be a sound financial decision, even at today’s prices. (If you’re renting, then your landlord is typically making a profit, which shows there is still some money to earn there.)
The big danger is of course a house price correction, that can put a hole in any ‘buy vs rent’ cashflow analysis for many years if you’re unlucky…
The “snowball” is real but misses the point. Over the past 5 years of a 23 year track record, I’m around 20:80 in favour of investment. Over the first 10 years, the proportion was 75:25 in favour of saving. Every £1k increase in spending in 2000 results in a £20k loss of net worth in 2023.
What this misses, however, is that the impact of a delta increase in spending in 2000 is negligible in net worth terms. If I’d increased my yearly spend in 2000 by 20%, my net worth now would only be 0.3% lower. I earn far more and spend far more now than compared to what I spent 23 years ago. Neither were ever going to be a constant.
For a single guy in his 20s, say an extra £5k in 2000 could have bought something worthwhile. It could have levered my quality of life. Now, for a married guy with two kids, that £5k buys nothing. My quality of life at around 50 is totally delevered.
My feeling looking back is those in their 20s should just spend. Sod saving. If they really want to focus on anything financial (error in my view), just look at earning more.
@BBBetter > 20s are going to find the advice on here a bit ‘theoretical’ considering the social pressure to buy a house.
Hmm. I am one of those old gits. While I accept that the UK has made a mess of housing, it was _always_ a tough ask. Low interest rates (and historically they are still low) now focus attention on the deposit. In 1992 I had the dubious pleasure of paying nearly 15% of the value of the house that wasn’t even worth that much. In interest alone – not capital repayment.
The difference is that in the past there were serviceable rental options for people that weren’t rich enough to buy a house.
Beware the social pressure to buy a house. I did save a 20% deposit to buy a house. In 1989. It was and still is the single worst financial decision I have ever made in my life and the most stupid spaffing of money I didn’t have on a pipe-dream.
In other ways I agree, though. I didn’t really save at all for a pension in my 20s, other that perhaps indirectly via SERPS. You don’t have to do that to retire early.
@TI > Even in my spikier pomp I guess I didn’t dare finish it.
Third rail, mate. Children and pets. Seriously. Don’t go there. Still jars me off the amount of money that New Labour snowed parents with, because I got introduced to higher rate tax in that regime. Sure Start was probably good, all the rest of the this that and the other/ special tax credits for the extra numbers, George Osborne did have a point.
Haha – the counter argument is that not having kids is the greatest economic arbitrage of all time, the ultimate in freeloading. You’re absolutely, completely reliant on those kids existing (imagine what would happen over the next decade or two to your quality of life if they weren’t produced), but you’re paying only a tiny fraction of what it costs the parents. Massive win! Incredibly sensible financial decision – I can’t fault the non-parents logic. But sure, also agreed we shouldn’t be going there (here) 😉
Aha, the ‘you’re selfish’ theory 😉 The New Labour part that rankled is summarised in this BBC article
I was effing skint at that time, because while I had a decent job the aforementioned negative equity balls-up. So yes, I did resent that snowing or parents with extra largesse. I didn’t have a problem with schools and youth clubs etc. And people tell me that Sure Start was a genuine positive shift that should have been kept.
I would agree the pendulum has swung about as much the other way, and the concomitant misery probably isn’t justfied by the savings in UC payments. There’s some argument that our future citizens might be less screwed up if their parents spent time with them rather than chasing more than 16 shitty ZHC minimum wage hours a week, I believe the limit used to be 16hrs.
Another data point is that when I was born, there were 3bn people on earth, the UN tell me it’s 8bn. We are a very, very, very long way from Isaac Asimov’s Solarians.
Educated, well off folks who read this blog have children because they want to – no problem with that. But I’m not buying it that they are doing it for the good of the country. And it is an elective choice, we’ve known how to have the fun without the outcome for getting on for 60 years now.
I wouldn’t go so far as to say its selfish, more that there would be an attractive humility in an acknowledgement from the willingly childless that you do kind of need those kids to keep the old merry-go-round turning. And if that logic is acceptable, then you’d probably also have to say the parents are doing the lions share of the heavy-lifting on your behalf to fulfill that requirement, not only in financial but also in time and energy terms. When you’re 70 and you hire a 30 year old plumber, you’re not really having to pay for the first 18 years of that plumbers upkeep. That externality has been taken care of by someone else to a large extent.
Also, we don’t have to worry about what the motives of any parents out there are to be able to clearly understand that if those kids don’t get manufactured somehow then we’ll all be in a spot of bother in pretty short order? It would be Mad Max within a quarter of a century.
That’s it, I promise! I fully understand no good can come of this, but I clearly can’t resist 😉
I really enjoyed the seaflooding – unchartered territories. Engineering a solution to the climate crisis seems to be the most plausible and the suggestion of flooding a desert below sea level reducing the med sea by 3mm (or something similar) interesting.
I think @159F’s comment isn’t suggesting people make parenting decisions on the basis of hoped-for retirement age, and it isn’t helpful to acribe “selfishness” to those choosing to remain childless. It is more fundamental: given that as animals we have an instinct to raise offspring and many do, decisions about saving rates change their nature. We can no longer simply balance lifestyle level now against more time in retirement, as well as the additional living costs of a family as opposed to a couple or single we also have to consider how much to invest in our children in the sense that their adult selves will be at least in part a product of their childhood experiences. Those experiences will result from time their parents are focussing on them rather than anything else, and for some things (extracurricular activities, family holidays) money that might alternatively go into savings.
It means that it is crazy to think of a single saving rate, for most people it will always be something that changes through life. And it also underlines the benefit of an occuapational pension where a certain level of saving continues regardless, without it ever seeming part of a discretionary spending choice.
Regarding kids, they are someone who can inherit – if you don’t have them you might want to think about who will inherit from you. In my will I had to have a backup beneficiary too in case everyone was dead – I chose the baby charity Tommy’s because I reckon that in terms of saving/maximising life you get most bang for your buck targeting prematurity – and as far as I could tell on the charity commission site Tommy’s was more efficient than Bliss (more got spent on the good cause and economies of scale)
Letting it go to the gov if you die intestate is a good cause in a way because the taxman pays for important services – but it might not be the most efficient.
There will always be people willing to have children! And carbon reduction (and generally using less food, housing etc) would need some to have no/less children
@Rhino — Well I’ll take the other side of that argument. 🙂
First, let’s take your case at face value. Everyone stops having kids, so eventually there are no 30-year old plumbers. Etc. Well okay, humanity is in managed decline and run-off. There’s no doubt at all society would be irrevocably and steadily changed forever until eventually you reach some kind of apocalyptic twilight.
However I’m not really convinced it’d be necessarily catastrophic for the individuals concerned.
The last two plumbers who came to my flat were at least 50! I’m being slightly facetious, but the reality is plenty of jobs can/could be done in pinch by an aging population. In practice we’d slowly retrench into dwindling population centers, lose some of the electricity grid over time, create new kinds of trading arrangements based on a sort of survivalist war footing. Of course it would be… different and eventually difficult. And we’d triage some stuff away early, I imagine. Including some things that make us uncomfortable to think about perhaps. (Cancer research, elderly care in hospitals).
But there’d potentially be some wins (no young men committing crimes…)
And after all, we wouldn’t have to make anything last for posterity. There’d be no future generations. We’d essentially be scavenging by the time there were only a few hundreds of millions in their 70s/80s left. At that point certainly things would be difficult. But being in your 80s is no bed of roses anyway, especially at any time in human history other than the past 30-50 years.
The reality is the people who have most to gain from the orderly progression of humanity are, generalizing, those with kids. I might have some humanistic or intellectual stake in it (and obviously I wish nobody any undeserved pain etc) but frankly I don’t have a dog in the fight of what the world looks like in 2100. In as much as I care, it’s equally for ‘nature’ as for humanity. My genes basically end here.
But anyway that’s in practice moot.
In practice right now there are at least a billion functionally poor under-18s in the world, very many of who could substitute for the child I didn’t have. This isn’t theoretical whimsy; look at the migrant boat crossings.
Often what people mean (not you personally, generally) when they complain about population decline is ‘the right kind of population’. In practice we have billions more mouths to feed than the world can optimally support. They’re just not well distributed.
Finally, far more than seemed likely 20 years ago, it could all be moot because the machines take over anyway. Ho hum. 🙂
On that note, I recommend David Flemmings “Lean Logic” for a grand vision of how the future could work in a post market economy.
The Investor 21 – your genes are everyone else’s and vice versa.
In the old world of 14% mortgage interest, it was possible to buy a property early in life. Later, when the mortgage was paid off and most of the saving and investing journey was behind us, we were able to become (older) parents. That was our life as it happened. It wasn’t planned that way.
During my first five years working my saving rate was below 10%. With career progression that moved up to 30% or more and stayed there as a parent. We’ve been financially careful parents with no private school fees to pay and relatively modest family holidays and have not found our costs to be too onerous so far.
@TI. I’d be careful arguing against having children. Democracy is on it’s last legs. At the National Socialism … sorry I meant National Conservatism conference today, one of those nice Tory MPs Miriam Cates was arguing there is one “overarching threat to Western civilisation, even more so than climate change … not enough babies.” I’m assuming she meant to say “white babies” but perhaps that is too obvious.
Re kids. I don’t think one should assume that those without kids are willingly or consciously there. There can be numerous factors including infertility, breakups, not finding the right partner at the right time that defeat biological imperatives. But I’ve no doubt that not having kids make FI aspirations easier as too probably does not having an unaligned partner. But to truy optimise you’re also potentially sucking out a lot of what make life worth living in the first place so…..
Crikey, that Miriam Cates makes me wonder what Cambridge University stands for these days, if they fail to inculcate basic general education. Hasn’t she read her Oswald Spengler? The overarching threat to Western Civilisation is that it’s flippin’ knackered, it’s been cock of the rock for too damn long. It’s whacked and worn out, it doesn’t know its values or what it stands for any more. Spengler put it well in Der Untergang des Abendlandes
“Money dictates. That will be what brings this Civilization to its end, overthrown, eventually by ‘blood.’”
though we should also give a nod to Oscar Wilde. A civilisation needs a common story that can inspire, and from that story come its values. They don’t necessarily have to be ‘good’ but they do have to be there. What values does our dear Miriam think the West stands for, and indeed did that fine Cambridge education equip her to articulate the concept? You can’t ask people to fight for a flag that is tattered and torn in the wind so much as to be unrecognisable.
Spengler’s thesis was that civilisations have a lifetime, and they overlap. Ray Dalio (be warned, perpetual doomster) has developed the same theme in purely financial terms over several centuries, it’s not hugely different from Spengler in a big-picture POV.
Surely falling birth rates are a good thing if one believes over population is a problem as this person does.
https://populationmatters.org/news/2018/10/sir-david-attenborough-we-must-act-on-population/#:~:text=Turning%20to%20population%2C%20Sir%20David,of%20increase%20is%20%E2%80%9Calarming%E2%80%9D.
and African countries are just following other countries trends but are a number of decades behind. Their population levels will stabilise over the coming decades and with it global population levels albeit around 11 billion is the latest UN forecast. Lagos is expected to have more people than the entire United Kingdom by 2060 odd I recall.
Western civilisations time in the Sun by number of people…that’s over.
Many countries have tried to encourage increasing birth rates – South Korea are having a good go at it at the moment and I think in almost every case across countries, it’s a universal failure.
https://www.theguardian.com/world/2023/feb/22/south-koreas-birthrate-sinks-to-fresh-record-low-as-population-crisis-deepens
If UK governments want to have a go at it, they could focus on making children more affordable. I thought one of the outcomes of this current cost of living crisis would be a fall in reproduction rates. Too expensive to have kids – or at least more than one is the idea.
You can squint at the graph below and infer that in the Blair years of the early noughties when cash was being splashed around a bit more, there was more money to have more children and hence the reproductive rate rose. Don’t know if that’s right or wrong.
https://www.macrotrends.net/countries/GBR/united-kingdom/fertility-rate#:~:text=The%20current%20fertility%20rate%20for,a%200%25%20increase%20from%202020.
That seaflooding article was interesting. Reminded me of some of the themes in Kim Stanley Robinson books like Green Earth and Ministry for the Future. Will it ever happen though, for some it seems a good idea and others may ague it destroys a wildlife habitat or someones livelihood. Wash and Severn barrage proposals come to mind – there are usually consequences…
I’m probably asking a silly question here but when talking about savings rates, is this generally the amount you are investing or just the overall total of your savings across different pots?
I only ask as I’m something of a reluctant investor, it always just seems too good to be true to me. I put a decent chunk away via salary sacrifice into my workplace pension, however when it comes to my take home pay I’m currently saving 26% as cash due to having house related things I want to do and also as I don’t like the idea of investing every spare penny. I’m putting 13% into my S&S ISA. So is my savings rate 13% or 39% ?
How do you decide what amount to invest vs saving for other things?
I have my emergency fund in place but I don’t think decorating or saving to replace my old car is really an emergency fund type expenditure. As I say, I’m a reluctant investor, mainly due to being a pessimist but should I put more money into my ISA?
@Residem — Definitions vary (and there are disagreements about whether to include, say, mortgage repayments in your savings rate) but generally it’s the percentage of take home pay that you don’t spend, regardless of how/where you sock it away.
Have a read of this:
https://monevator.com/savings-rate-to-the-rescue/
Also, on the repayment mortgage as savings front:
https://monevator.com/why-making-monthly-payments-on-a-repayment-mortgage-is-a-form-of-saving/